OPEC reported growth in oil production in October

OPEC reported growth in oil production in October, although the group headed to finalize the plan to cut production at its meeting at the end of November. The deal is part of efforts to stabilize the oil prices and reduce the overcapacity on the market. The oil produced from OPEC countries increased by 0.24 million barrels per day in October to 33.64 million barrels per day, due to continuing increase of yields in Nigeria, Libya and Iraq.

OPEC production in October is now well above the upper limit of the range, which group of contracted on the meeting in Algeria in September. This highlights the challenge facing members in the implementation of the deal at the meeting on November 30 in Vienna. According to the report, OPEC has produced almost 1 million barrels per day more than its forecast for oil demand next year.

The main contributors to this increase – Nigeria, Libya and Iraq, are the members, who want an exception from the agreement for limiting of production, due to internal conflicts and costs for wars.

Without limiting of oil production, the world reserves of oil will probably continue to increase, which would impose additional pressure on oil prices. The crude oil is still traded below 50 USD per barrel, against the levels of over 100 a USD per barrel in mid-2014.

“Looking ahead, it is important to consider the direct impact, which the alleged balance of supply and demand have on reserves, accounting the expected demand for oil from OPEC in 2017 – 32.7 million barrels per day”, says the report of OPEC. “The adjustment of supply from OPEC and outside will accelerate the absorption of significant surplus in global oil reserves and help to achieve the rebalancing of the market”, adds the report.

The task of OPEC to reduce the global oil supplies is further hampered by producers outside the cartel, such as Russia, Brazil, Canada and Kazakhstan, which also produce at record high levels, in attempt to fill the budget deficit formed by the sharp decrease in oil prices.

Meanwhile, OPEC maintained its outlook for global growth in oil demand next year unchanged at 1.15 million barrels per day, as economic activity has stagnated over the two-year despite a collapse in oil prices.

The collapse of prices to less than 50 USD per barrel, now rocked the oil sector, forcing companies to cut costs and jobs and hit the economies of some OPEC producers, mainly Venezuela, which rely on revenue of oil.